PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ATLAS FOOD SYSTEMS AND SERVICES,

INCORPORATED,

Plaintiff-Appellant,

v.

CRANE NATIONAL VENDORS,

INCORPORATED; RICHARD RICCI;

No. 95-1717

STEVEN FREEDMAN,

Defendants-Appellees,

and

MARS ELECTRONICS, INCORPORATED;

FRANK HARTMANN,

Defendants.

ATLAS FOOD SYSTEMS AND SERVICES,

INCORPORATED,

Plaintiff-Appellee,

v.

CRANE NATIONAL VENDORS,

INCORPORATED; RICHARD RICCI;

No. 95-1718

STEVEN FREEDMAN,

Defendants-Appellants,

and

MARS ELECTRONICS, INCORPORATED;

FRANK HARTMANN,

Defendants.

Appeals from the United States District Court

for the District of South Carolina, at Greenville.

Henry M. Herlong, Jr., District Judge.

(CA-92-2095-6-20)
Argued: April 5, 1996

Decided: October 30, 1996

Before HALL, NIEMEYER, and HAMILTON, Circuit Judges.

_________________________________________________________________

Affirmed by published opinion. Judge Niemeyer wrote the opinion,

in which Judge Hall and Judge Hamilton joined.

_________________________________________________________________

COUNSEL

ARGUED: Thomas W. Traxler, CARTER, SMITH, MIRRIAM,

ROGERS & TRAXLER, Greenville, South Carolina, for Appellant.

George Kermit Lyall, NELSON, MULLINS, RILEY & SCARBOROUGH, L.L.P., Greenville, South Carolina, for Appellees. ON

BRIEF: T. S. Stern, Jr., GRANT, LEATHERWOOD & STERN,

Greenville, South Carolina, for Appellant. A. M. Quattlebaum, Jr.,

William S. Brown, NELSON, MULLINS, RILEY & SCARBOROUGH, L.L.P., Greenville, South Carolina, for Appellees.

_________________________________________________________________

OPINION

NIEMEYER, Circuit Judge:

The principal issue presented in this appeal is whether the district

court abused its discretion in ordering a new trial unless the plaintiff

agree to a remittitur of a $3-million punitive damage award and, after

the plaintiff's rejection of the remittitur and retrial, another new trial

unless the plaintiff agree to a remittitur of a $4-million punitive damage award. This issue raises important questions about the scope of

the district court's authority, through the grant of new trials under

Federal Rule of Civil Procedure 59(a), to review jury awards of punitive damages.

 2
Atlas Food System and Services, Inc., ("Atlas") sued Crane

National Vendors Division of Unidynamics Corporation ("National

Vendors") and two of its officers in federal court under diversity jurisdiction, demanding compensatory and punitive damages in connection with its purchase of defective vending machines. In its complaint,

Atlas alleged breach of contract, breach of express and implied warranties, fraud, and deceptive and unfair trade practices under South

Carolina law.1 The jury returned a verdict against National Vendors

in the amount of $1.32 million in compensatory damages and $3 million in punitive damages and against its officers in the amount of

$120,000 in compensatory damages and $100,000 in punitive damages. Following post-trial motions, the district court reduced the compensatory damage award against National Vendors and found the $3-

million punitive damage award excessive, granting National Vendors

a new trial on punitive damages unless Atlas agree to a punitive damage award of $1 million. When Atlas refused the remittitur, the district court ordered a new trial on punitive damages.

After hearing substantially the same evidence, a second jury

awarded Atlas $4 million in punitive damages. Again, on National

Vendors' post-trial motion, the district court found the award excessive and ordered a third trial unless Atlas agreed to a $1 million punitive damage award. While Atlas did not agree to the remittitur of the

second punitive damage award, it agreed not to demand a third trial

and to accept the amount left standing following an appeal on the

damage questions. Accordingly, the district court certified the case for

immediate appeal pursuant to 28 U.S.C. § 1292(b), and we agreed to

hear the case.

On appeal, Atlas contends that the district court abused its discretion in granting National Vendors' motions for a new trial unless

Atlas agree to a remittitur and clearly erred in reducing the first jury's

compensatory damage award by an amount described in Atlas' settlement agreement with Mars Electronics as consideration for a confidentiality provision. On cross-appeal, National Vendors contends that

the district court erred in denying its motion for judgment as a matter

_________________________________________________________________

1 Atlas also sued Mars Electronics International, Inc., but it settled its

claims against Mars before trial, and the trials in this case proceeded only

against National Vendors and its officers.

 3
of law on punitive damages after each trial and in limiting the scope

of the second trial to punitive damages. The National Vendors officers joined the cross-appeal only in connection with the district

court's denial of their motion for judgment as a matter of law on punitive damages.

Finding no reversible error, we affirm the rulings of the district

court.

I

National Vendors had for a long time been the supplier of vending

machines to Atlas, a South Carolina corporation engaged in the business of selling food to the public through vending machines. From

about December 1989 through October 1991, however, National Vendors sold Atlas 340 defective machines. The defects rendered the

machines susceptible to "yank-cheating," a practice by which a customer pulls his dollar bill out of a vending machine after the machine

has validated the bill, thereby retaining his dollar and stealing food

from the machine.

Two separate defects in National Vendors machines allowed the

yank-cheating. The first defect existed in the bill validator, the component that takes in a customer's bill, validates it, and stores it in the

vending machine. In February 1990, National Vendors had agreed,

without Atlas' knowledge, to increase dramatically its purchase of bill

validators from its secondary component supplier, Mars Electronics.

Although National Vendors never informed Atlas of its commitment

to buy Mars validators, it began a concerted effort in April 1990 to

switch Atlas to Mars by misrepresenting that Atlas would not encounter cash shortages with Mars validators. The Mars validators, however, were defective, and some evidence indicated that National

Vendors may have been aware of that problem beginning in 1991.

The second defect that permitted yank-cheating appeared in the

erasable programmable output memory chips, or "Eproms" ("electronically programmable read only memory"), that created the electronic

interface between the vending machine and its bill validator. National

Vendors supplied the Eproms for its own machines, and the interface

 4
problems Atlas experienced were attributable to National Vendors'

misinterpretation of Mars Electronics' engineering specifications.

After providing National Vendors several opportunities to remedy

the problems with its vending machines, Atlas revoked its acceptance

of the machines in July 1992. And when National Vendors refused to

refund Atlas' money, Atlas brought this diversity action against

National Vendors, alleging counts for (1) revocation of acceptance,

(2) breach of contract accompanied by a fraudulent act, (3) fraud, (4)

constructive fraud, and (5) unfair trade practices. Atlas also named

National Vendors officers, Richard Ricci and Steven Freedman, as

defendants in its constructive fraud count.

After a week-long trial, the jury returned a verdict for Atlas on all

claims, awarding it $1,317,822 in compensatory damages; finding

that Atlas was entitled to punitive damages from each of the defendants; and finding that National Vendors' unfair trade practices had

not been "willful or knowing." After the jury returned that verdict, the

parties presented argument to the jury on the amount of punitive damages. Following argument, the court instructed the jury under South

Carolina law that it could grant punitive damages if it found by clear

and convincing evidence that one or more of the defendants' conduct

was "outrageous and extraordinary" or evinced"a reckless or callous

disregard of or indifference to the rights of others." Following further

deliberation, the jury awarded Atlas $3 million in punitive damages

from National Vendors, $60,000 from Ricci, and $40,000 from Freedman.

All three defendants filed post-trial motions for judgment in their

favor as a matter of law, which the district court denied. The court

did, however, reduce the compensatory damage verdict against

National Vendors and add prejudgment interest, yielding a

$986,510.90 compensatory damage award. Part of the court's reduction resulted from a $316,688.25 setoff to which the court found

National Vendors entitled because of an earlier settlement agreement

between Atlas and Mars Electronics. Although the Atlas-Mars settlement had attributed $306,668.25 as consideration for a confidentiality

provision and only $10,000 as consideration for Mars' release of

Atlas' claim against it for the defective bill validators, the district

court concluded that the entire $316,688 sum represented payment for

 5
the injury covered by Atlas' compensatory damage award from

National Vendors. The court also denied the defendants' post-trial

motion for judgment as a matter of law on punitive damages but

granted National Vendors' motion for new trial unless Atlas agreed

to reduce its punitive damage award from $3 million to $1 million.

Even though the district court found that National Vendors' conduct

"[a]t times . . . could be viewed as rising to the level of reckless disregard of Atlas' rights," it reasoned that the evidence did not warrant

the jury's $3 million award because it showed "[a]t worst . . . miscommunication, delay, evasion of responsibility, and poor business

practices on the part of National."

Atlas rejected the district court's $2 million remittitur, opting for

a new trial, and the district court ordered a new trial only on punitive

damages.

At the second trial, the district court advised the jury, over National

Vendors' objection, about the first jury's findings and similarly permitted Atlas' counsel to make reference to those findings. The second

jury returned another verdict for Atlas, this time awarding Atlas $4

million in punitive damages. The district court again denied National

Vendors' post-trial motion for judgment as a matter of law on punitive damages. But the court did, once again, grant National Vendors'

motion for a new trial unless Atlas agreed to reduce its punitive damage award to $1 million. In doing so the court explained that, "my ruling is identical to my previous ruling that unless the plaintiff remit[ ]

all but $1 million then there will be a new trial." "If they want to keep

going for more, they can do that. And if they don't produce any more

different testimony, I guess this court will be required to continue to

rule as it sees the facts and the law."

This appeal followed.

II

As its principal argument on appeal, Atlas contends that the district

court abused its discretion in granting National Vendors' successive

motions for new trials nisi remittitur after two juries awarded Atlas

punitive damages of $3 million and $4 million, respectively. While

acknowledging the authority of district courts to set aside juries' puni-

 6
tive damage awards in exceptional cases, Atlas maintains that this is

not such a case and, therefore, that the district court merely substituted its own judgment on punitive damages for that of the jury.

Moreover, Atlas claims entitlement to the second jury's $4 million

award because National Vendors opted to "roll the dice" by filing a

motion for a new trial after the first trial, thereby relinquishing the

benefit of the lower punitive damage award.

At the outset, we note that a remittitur, used in connection with

Federal Rule of Civil Procedure 59(a), is the established method by

which a trial judge can review a jury award for excessiveness. Remittitur is a process, dating back to 1822, by which the trial court orders

a new trial unless the plaintiff accept a reduction in an excessive jury

award. See Blunt v. Little, 3 F. Cas. 760 (C.C.D. Mass. 1822) (No.

1578) (Story, J.). And the permissibility of remittiturs is now settled.

See 11 Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane,

Federal Practice and Procedure, § 2815, at 163 (1995). Indeed, if a

court finds that a jury award is excessive, it is the court's duty to

require a remittitur or order a new trial. See Linn v. United Plant

Guard Workers, Local 114, 383 U.S. 53, 65-66 (1966).

Absent any constitutional challenge to the amount of a jury's punitive damage award, see BMW of North America v. Gore, 116 S. Ct.

1589 (1996) (holding "grossly excessive" punitive damage award violates the Fourteenth Amendment's Due Process Clause), a federal district court reviews such an award by applying the state's substantive

law of punitive damages under standards imposed by federal procedural law.2 Thus, the district court is "to determine whether the jury's

_________________________________________________________________

2 South Carolina substantive law directs that a jury deciding the amount

of punitive damages to be awarded consider several factors: (1) the

defendant's degree of culpability; (2) the duration of the defendant's conduct; (3) the defendant's awareness or concealment of its conduct; (4) the

existence of similar past conduct by the defendant; (5) the likelihood that

the jury's punitive damage award will deter the defendant or others from

like conduct; (6) whether the award is reasonably related to the harm

likely to result from such conduct; (7) the defendant's ability to pay; and

(8) any "other factors" deemed appropriate. See Gamble v. Stevenson,

406 S.E.2d 350, 354 (S.C. 1991) (establishing factors for post-trial state

court review of jury verdicts); Orangeburg Sausage Co. v. Cincinnati

Ins. Co., 450 S.E.2d 66, 73 (S.C. Ct. App. 1994) (requiring Gamble factors to be considered by the jury), cert. denied, 116 S. Ct. 331 (1995);

see also Mattison v. Dallas Carrier Corp., 947 F.2d 95, 109-10 (4th Cir.

1991) (same).

 7
verdict is within the confines set by state law, and to determine, by

reference to federal standards developed under Rule 59, whether a

new trial or remittitur should be ordered." Browning-Ferris Indus. of

Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 279 (1989); see

also Defender Indus., Inc. v. Northwestern Mut. Life Ins. Co., 938

F.2d 502, 504-05 (4th Cir. 1991) (en banc). Those Rule 59 standards

are well established in the Fourth Circuit:

On such a motion it is the duty of the judge to set aside the

verdict and grant a new trial, if he is of the opinion that [1]

the verdict is against the clear weight of the evidence, or [2]

is based upon evidence which is false, or [3] will result in

a miscarriage of justice, even though there may be substantial evidence which would prevent the direction of a verdict.

Aetna Casualty & Sur. Co. v. Yeatts, 122 F.2d 350, 352-53 (4th Cir.

1941) (numerals added); see also Mattison v. Dallas Carrier Corp.,

947 F.2d 95, 108 (4th Cir. 1991); Defender Indus., 938 F.2d at 507;

Johnson v. Parrish, 827 F.2d 988, 991 (4th Cir. 1987). Appellate

review of a district court's ruling under Rule 59 is for abuse of discretion. Browning-Ferris, 492 U.S. at 279.

To determine in this case whether the district court abused its discretion in granting either or both of National Vendors' new trial

motions, we must examine more closely our three-pronged Rule 59

standard and the role served by each prong. The first two prongs of

our review standard require a district court to determine purely factual

questions: whether the jury's damages award is (1)"against the

weight of the evidence" or (2) "based upon evidence which is false."

Johnson, 827 F.2d at 991; Aetna Casualty , 122 F.2d at 352. This

review encompasses a comparison of the factual record and the verdict to determine their compatibility. Consequently, jury determinations of factual matters such as liability on a cause of action, liability

for compensatory and punitive damages, and the amount of compensatory damages will be reviewed by determining whether the jury's

verdict is against the weight of the evidence or based on evidence

which is false. The jury's determination of the amount of punitive

damages, however, is not a factual determination about the degree of

injury but is, rather, an almost unconstrained judgment or policy

choice about the severity of the penalty to be imposed, given the

 8
jury's underlying factual determinations about the defendant's conduct. Because the factual record provides no direct foundation for the

amount of punitive damages, a review of the size of the jury's award

best utilizes the third prong of the Rule 59 review standard --

whether the jury's award will result in a miscarriage of justice. See

Defender Indus., 938 F.3d at 507.

The miscarriage-of-justice standard recognizes the hybrid nature of

punitive damage awards. As South Carolina's punitive damages test

illustrates, some considerations underlying the amount of a punitive

damage award may be factual -- e.g., the defendant's ability to pay

-- and, therefore, would be well suited to the jury's role of finding

facts. But other policy-related elements -- e.g., the likelihood that an

award will deter the defendant or others from engaging in similar conduct -- are not factual questions and, therefore, are more appropriately decided by the trial judge. The judge's unique vantage point and

day-to-day experience with such matters lend expertise and consistency.

Therefore, when reviewing the amount of a jury's punitive damage

award under Federal Rule of Civil Procedure 59, the district court has

a participatory decisionmaking role that it does not have when

reviewing a jury's findings based solely on facts. Because the jury's

determination of the amount of such an award is almost entirely

ungrounded in the factual record, a court cannot generally test the

amount of a punitive damage award against record facts to conclude

whether, for example, a jury's $10 million award or $1 million award

is the correct one. And a jury, which is called upon to make that "sentencing" type of judgment only in the single case before it, is relatively ill-equipped to do so. On the other hand, the district courts not

only see punitive damage awards daily, but themselves are required

frequently to impose penalties for punishment and deterrence in a

wide array of circumstances, both in civil and in criminal contexts.

Indeed, in criminal cases, our system gives juries virtually no input,

except in capital cases, to determine the amount of penalties. That

division of responsibility in criminal cases influences our conclusion

that in civil cases, judges should at least participate through their

review responsibility in establishing a penalty amount. Cf. BMW, 116

S. Ct. at 1603 & 1603 n.38 (linking the analysis of constitutionally

 9
excessive punitive damage awards to amounts of criminal statutory

fines prescribed for similar conduct).

Thus, we conclude that punitive damage determinations involve a

partnership between a jury and trial judge, each with a comparative

institutional advantage, in which the judge inevitably enjoys the final

word. While a district court must give due respect to a jury's comparative advantages in initially deciding upon the amount of punitive

damages to award, the court may depart from that award to the extent

that it concludes that its own comparative advantages warrant such a

departure. Accordingly, we conclude that while a jury is authorized

to award punitive damages on a framework of liability and the factors

supplied by state law, the judgment a jury makes as to the amount is

reviewable by federal trial courts under Federal Rule of Civil Procedure 59 less deferentially than are factual findings which may be measured against the factual record. The court's review of the amount of

a punitive damages award should involve comparison of the court's

independent judgment on the appropriate amount with the jury's

award to determine whether the jury's award is so excessive as to

work an injustice.

Even though, in this case, National Vendors has asserted no constitutional challenge to the amount of the punitive damage awards, we

nevertheless must determine whether the Seventh Amendment constrains judicial review of the amount of a jury's punitive damage

award. In Defender Industries, we held that"the seventh amendment

guarantees the right to a jury determination of the amount of punitive

damages" because "[a]n assessment by a jury of the amount of punitive damages is an inherent and fundamental element of the commonlaw right to trial by jury." 938 F.2d at 507. But Defender Industries

in no way suggested that the jury's authority to award punitive damages is absolute or that the trial judge cannot, consistently with the

Constitution, play a meaningful role in punitive damage determination. To the contrary, in Defender Industries we affirmed the district

court's decision to set aside the jury's punitive damages award on the

ground that the award "was so excessive as to constitute a miscarriage

of justice." 938 F.2d at 507.

Yet more instructive is the holding in Tull v. United States, 481

U.S. 412 (1987), where the Supreme Court considered whether the

 10
Seventh Amendment guaranteed a right to trial by jury on both the

liability for and the amount of a statutory penalty. The Court held that

while the Seventh Amendment requires that the jury determine

liability for a penalty, it does not require that a jury determine its

amount. Id. at 427. It explained, "highly discretionary calculations

that take into account multiple factors," such as are necessary in

determining a penalty, are "traditionally performed by judges." Id.

Accordingly, we conclude that the Seventh Amendment imposes no

barrier to the trial judge's participation in determining the amount of

a punitive damages award through the review mechanism provided by

remittitur and Rule 59(a).

Applying the foregoing principles to the district court's orders in

this case, we cannot conclude that the district court abused its discretion in ordering successive new trials nisi remittitur. The district court

reasoned that the $263,538 amount of Atlas' loss"was not terribly

egregious." Moreover, because Atlas' "losses were caused by third

parties who cheated the machines," National Vendors' "fraud appear-

[ed] to have been based more upon sins of omission than commission." Relying on a comparison to Defender Industries, the court

concluded that the relationship of National Vendors' conduct and the

harm it caused was not sufficiently substantial to justify either jury's

punitive damage award and warned that unless Atlas produced different testimony in future trials, it would continue"to rule as it sees the

facts and the law." These conclusions fell well within the scope of the

district court's authority under Rule 59(a).

III

Atlas also challenges the district court's order reducing the jury's

compensatory damage award by the amount received in settlement

from Mars Electronics, the manufacturer of the defective bill validator

component. Mars had originally been named a defendant in this

action, but after the complaint was filed and before trial, Atlas entered

into a settlement agreement with Mars. In the settlement agreement,

Atlas and Mars expressly allocated their $317,000 settlement amount,

attributing $10,000 to Atlas' claim against Mars for the defective

components and $307,000 for Atlas' agreement to keep the settlement

confidential. The district court found, however, that the entire

$317,000 represented consideration for the same injury covered by

 11
the jury's compensatory damage award in this case. Atlas contends

that the district court, in so ruling, erroneously rewrote "the contract

between Atlas and Mars . . . effectively depriv[ing] Atlas of any consideration that it [received] in exchange for keeping the settlement

terms confidential."

To resolve the substantive question of whether National Vendors

is entitled to a setoff for the Atlas-Mars settlement, we apply South

Carolina law. See Hines v. IBG Int'l, Inc., 813 F.2d 1331, 1334-355

(4th Cir. 1987); Garner v. Wyeth Lab., Inc., 585 F. Supp. 189, 191

(D.S.C. 1984). Under South Carolina law, a non-settling defendant is

entitled to a pro tanto reduction of a judgment in the same cause of

action. Powers v. Temple, 156 S.E.2d 759, 761 (S.C. 1967); Ward v.

Epting, 351 S.E.2d 867, 875 (S.C. Ct. App. 1986). South Carolina's

setoff rule rests on the "almost universally held[principle] that there

can be only one satisfaction for an injury or wrong." Truesdale v.

South Carolina Highway Dep't, 213 S.E.2d 740, 746 (S.C. 1975).

While state law governs the substantive right to setoff, federal law

dictates our standard of review. And, under federal law, a district

court's decision to set off a damage award is reviewed for clear error.

See Fed. R. Civ. P. 52(a); Norfolk Shipbuilding & Drydock Corp. v.

The M/Y La Belle Simone, 537 F.2d 1201, 1203 (4th Cir. 1976); see

also Reilly v. United States, 863 F.2d 149, 163 (1st Cir. 1988); Cole

v. United States, 861 F.2d 1261, 1263 (11th Cir. 1988). We find clear

error only if, after reviewing all the evidence, we are "left with the

definite and firm conviction that a mistake has been committed."

United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948).

At the hearing on whether to reduce Atlas' compensatory damage

award because of its settlement with Mars, the district court inquired

into the true nature of the Mars-Atlas settlement agreement, providing

Atlas the opportunity to explain what consideration it had given for

Mars' payment. But Atlas' counsel "was unable to name anything of

value -- other than the claims against Mars -- that Atlas gave up for

the payment." Concluding that the Mars-Atlas settlement was therefore "not, in fact, a bargained-for-exchange," the court "look[ed]

beyond appearances and disregard[ed] [the] allocation of [the] settlement." Given the comparatively enormous amount that the settlement

agreement had allocated to a confidentiality agreement and Atlas'

 12
failure to account for it, we cannot conclude that the district court

committed clear error in treating the entire $317,000 as de facto consideration for a settlement of Atlas' legal claims against Mars. Were

we to indulge the parties' manipulative attribution of settlement

amounts, we would compromise South Carolina's policy of permitting setoffs to ensure against multiple recovery for the same injury.

Atlas argues that by reducing the compensatory damage award by

the amount of consideration given for the confidentiality of its settlement with Mars, the court rewrote the contract in violation of the

holding in Ward v. Epting, 351 S.E.2d 867 (S.C. Ct. App. 1986). In

Ward, the settling parties allocated $29,500 to plaintiff's pain and suffering and $500 to his wrongful death claim. In setting off only $500

on plaintiff's claim against a non-settling co-defendant on the wrongful death claim, the South Carolina court explained,"[T]here was sufficient evidence to present a jury question on [the plaintiff's] . . . pain

and suffering" claim against the settling defendant. 351 S.E.2d at 875.

Thus, unlike in this case, the court in Ward enforced the terms of the

settlement agreement because it found that real value had been given

for each portion of that agreement and, therefore, that the agreement's

form conveyed its substance.

IV

On its cross-appeal, National Vendors asks us to go further than

affirm the district court's remittitur; it contends that the district court

erred in denying its motion for judgment as a matter of law concerning punitive damages. It argues that Atlas' evidence established, at

worst, that National Vendors' employees had exhibited "sloppy communication with each other, with Mars Electronics, and with Atlas."

National Vendors' officers join National Vendors on this issue, but

only with respect to the district court's denial of their motion following the first trial.

Under South Carolina law, punitive damages may be awarded to

punish a tortfeasor for willful, wanton, or reckless behavior. See

Gilbert v. Duke Power Co., 179 S.E.2d 720, 723 (S.C. 1971); Rogers

v. Florence Printing Co., 106 S.E.2d 258, 261 (S.C. 1958); see also

Defender Indus., 938 F.2d at 505. And under federal law, a district

court should not grant a judgment notwithstanding the verdict unless

 13
there was no evidence presented in the case that would authorize the

jury's verdict. See id. On appeal, we review the district court's refusal

to grant a judgment notwithstanding the verdict only"to determine if,

viewing the evidence in the light most favorable to the party [who]

oppos[ed] the motion, [the] jury could reasonably find in favor of that

party." Id.

Following both trials, the district court found that sufficient evidence was presented to support the jury's decision to award punitive

damages, explaining that the defendant's conduct"at times . . . could

be viewed as rising to the level of reckless disregard of Atlas' rights."

And, upon our independent review of the record, we agree. It bears

noting from the outset that none of the defendants now contests the

first jury's findings that National Vendors had committed fraud, constructive fraud, breach of contract accompanied by a fraudulent act,

and unfair trade practices and that National Vendors' two officers had

committed constructive fraud.

Atlas presented sufficient evidence at both trials to create a jury

question concerning whether National Vendors had acted at least

recklessly in concealing the problems with its machines from Atlas.

Employee memoranda and testimony established that National Vendors had known about the defects in its Eproms by 1990 and in Mars'

validators by early 1991. Nevertheless, from the spring of 1990

through 1992, National Vendors responded to Atlas' complaints about

cash shortages by denying that its machines were susceptible to yankcheating, pleading ignorance about the source of Atlas' problems, and

persuading Atlas to spend $30,000 on a different type of coin rejecter

for its machines. Moreover, although testimony at both trials indicated that National Vendors had received similar complaints about

cash shortages from other customers, National Vendors told Atlas that

it was its only customer experiencing such problems. Indeed, National

Vendors personnel testified that it was company policy not to inform

customers of any problems with National Vendors machines unless

absolutely necessary, and National Vendors' own expert witness on

the vending machine industry admitted that National Vendors had

never revealed to him the cause of the problems with the machines.

Although National Vendors insisted at both trials that it had confronted Mars when it discovered its machines were vulnerable to

yank-cheating and that Mars had assured it a newly developed valida-

 14
tor would solve the problem, Atlas' early 1992 inventory of its

National Vendors machines revealed that National Vendors had sold

Atlas most of its defective machines after learning of their susceptibility to yank-cheating.

Atlas also adduced sufficient evidence before both juries to prove

that National Vendors had committed "economic blackmail" by refusing to ship it vending machines in May 1992. In an attempt to force

National Vendors to resolve the problems with its machines, Atlas

began in early 1992 to place in an interest bearing escrow account

payments due to National Vendors for machines Atlas had already

purchased. In response, National Vendors informed Atlas' chairman

that it wanted Atlas to bring its account current and, on April 6, 1992,

placed Atlas on a "cash terms" basis only. Needing to fill its equipment commitments and believing that "cash terms" meant C.O.D.

only, Atlas ordered 24 more vending machines from National Vendors, C.O.D., in late April. National Vendors accepted the order and

promised shipment by May 14, 1992. Although it had decided by

May 1, 1992, not to ship the machines unless Atlas released the

money it had placed in escrow, National Vendors waited until May

14, 1992, to inform Atlas of its decision. We share the district court's

view that "National's explanation that `cash basis' meant that all sums

on account were due before the machines would be delivered, rather

than simply meaning that Atlas had to pay cash for them, was less

than convincing." Furthermore, Steven Freedman admitted in his testimony that National Vendors' failure to notify Atlas before May 14

resulted from "a business decision."

Finally, the evidence at both trials showed that Freedman had

accepted Atlas' April 1992 order for the additional vending machines

and that both he and Richard Ricci had participated in the decision not

to ship those machines to Atlas. Accordingly, we agree with the district court that both National Vendors officers were"intimately

involved" in the actions underlying National Vendors' liability for

constructive fraud and conclude that there was sufficient evidence to

sustain the jury's decision to hold them, along with their employer,

liable to Atlas for punitive damages.

Under the circumstances, we believe this case is easily distinguished from Mosser v. Fruehauf Corp., 940 F.2d 77 (4th Cir. 1991),

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upon which National Vendors so heavily relies. In Mosser, we

affirmed the district court's decision to set aside a punitive damages

award in a wrongful death action against the manufacturer of an allegedly defective flatbed trailer where the plaintiff had failed to adduce

any proof that the defendant had any prior notice of the danger presented by its aluminum side rail assembly system. While acknowledging that the defendant's internal breakdown of communications,

which prevented the company from discovering the potential danger

posed, may have been negligent, we found no record evidence revealing a "deliberate blind eye to danger." Id . at 86. Accordingly, we concluded that the "district court properly refused to inflate a case of

carelessness into one of wanton disregard." Id. at 83-84.

We recognized in Mosser that while "[t]he difference between

reckless misconduct and [negligence] is a difference in the degree of

the risk" presented, the difference "is so marked as to amount substantially to a difference in kind." Id. at 85 (quoting Restatement (Second)

of Torts § 500, cmt. g (1965) (omission in original)). Far from demonstrating that National Vendors, Ricci, and Freeman had merely acted

negligently, Atlas' evidence created jury questions on whether the

defendants had recklessly, knowingly, or intentionally misled Atlas

by concealing problems with their vending machines and refused to

ship machines that Atlas had ordered to pressure it into paying its outstanding debt. The juries concluded that they had. And we are convinced that the "difference in the degree" of the risk to which the

defendants subjected Atlas makes this case different"in kind" from

Mosser.

National Vendors also contends that the first jury's specific finding

that the defendants' unfair trade practices were not"wilful or wanton"

necessarily rendered the first punitive damages award "erroneous as

a matter of law" because "[t]he conduct alleged to be the unfair trade

practices was the same conduct which was alleged in support of

[Atlas'] fraud claims." Even if we assume that National Vendors did

not waive its inconsistent verdict argument by failing to raise it before

the first jury was discharged, the argument is still not persuasive. Not

only is the proper remedy for an inconsistent verdict a new trial, not

judgment as a matter of law, see Griffin v. Matherne, 471 F.2d 911,

915 (5th Cir. 1973), but, more importantly, the first jury's findings are

reconcilable.

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An appeals court is "abjured to determine whether a jury verdict

can be sustained, on any reasonable theory." Richardson v. Suzuki

Motor Co., 868 F.2d 1226, 1246 (Fed. Cir. 1989); see also Hines v.

IBG Int'l, Inc., 813 F.2d 1331, 1334 (4th Cir. 1987). And it must,

therefore, harmonize seemingly inconsistent verdicts if there is any

reasonable way to do so. See Gallick v. Baltimore & Ohio R.R. Co.,

372 U.S. 108, 119 (1963). As the district court explained, because

South Carolina authorizes a jury to award punitive damages "even

when the wrongdoer does not actually realize that he is invading the

rights of another, provided the act is committed in such a manner that

a person of ordinary prudence would say that it was a reckless disregard of another's rights . . . the jury may well have found that,

although National did not realize that it was engaging in unfair methods of competition or trade, its actions . . . displayed a reckless disregard to Atlas' rights." (Citations and internal quotations omitted).

V

Finally, we address National Vendors' assignments of error in connection with the second trial which was limited to the issue of punitive damages. While National Vendors accepts as a fall-back position

the district court's reduction of compensatory damages and remittitur

of the punitive damage award, it urges that the district court should

have ordered a completely new trial on all issues. We disagree.

A

First, National Vendors contends that the district court abused its

discretion in limiting the scope of the second trial to punitive damage

issues because the same jury "passion, caprice or prejudice" that

caused the court to order a remittitur "may have infected the jury's

determination of liability as well as damages." Moreover, according

to National Vendors, "the issue of punitive damages [was] so intertwined with the threshold issue of liability that a partial new trial on

damages alone . . . create[d] jury confusion and uncertainty."

A district court's decision to order a new trial falls within the district court's discretion, and the propriety of granting a new trial on

fewer than all of the issues in a case hinges on whether the issues to

be retried are sufficiently "distinct and separable from the others that

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a trial of [those issues] alone may be had without injustice." Gasoline

Products Co. v. Champlin Refining Co., 283 U.S. 494, 500 (1931).

Considerations of economy, fairness, and repose may provide justification for preserving a jury's liability determination that has been

fairly and fully made and ordering only a new trial on damages

"where there is no substantial indication that the liability and damage

issues are inextricably interwoven, or that the first jury verdict was

the result of a compromise of the liability and damage questions."

Great Coastal Express, Inc. v. International Brotherhood of

Teamsters, 511 F.2d 839, 846-47 (4th Cir. 1975). We review a district

court's decision to grant a partial new trial for abuse of discretion. See

Swentek v. USAir, Inc., 830 F.2d 552, 560 (4th Cir. 1987); Great

Coastal Express, 511 F.2d at 847.

In this case, we find no indication in the record to support National

Vendors' suggestion that the district court's decision to set aside the

first jury's punitive damage award necessitated a full retrial on all

issues because the jury's "prejudice" may have infected its rulings on

Atlas' substantive claims. A jury's reasonable findings of liability and

compensatory damages are not rendered unreasonable simply on the

basis that it awarded an excessive amount of punitive damages. Moreover, in this case, the district court concluded that there was sufficient

evidence to support the jury's liability and compensatory damage

findings, and National Vendors has not appealed any of those rulings.

We also conclude that the district court's decision to limit the second trial to punitive damage issues was not an abuse of discretion

based on the interrelationship of punitive damage issues with other

issues in the case. All of the evidence relating to National Vendors'

willful or wanton conduct was before the second jury, enabling it to

render a proper verdict on both the liability for and amount of punitive damages.

B

For similar reasons, we also reject National Vendors' contention

that the district court erred in commenting to the second jury about

the findings made by the first jury and in allowing counsel for Atlas

to comment similarly. A finding of liability and compensatory damage is not only a prerequisite to finding punitive damages, it provided

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the jury with important background information. From our review of

the record in the second trial we find nothing in the references to the

first jury verdict that was capable of "incit[ing] the prejudice and passion of the jury."

C

Finally, National Vendors contends that the district court abused its

discretion in admitting rebuttal testimony from Ellen Stoudemire during Atlas' rebuttal of National Vendors' case. Stoudemire, the former

owner of Seacoast Vending Services, Inc. and the only National Vendors customer presented by Atlas at the second trial, testified that Seacoast Vending, like Atlas, had experienced cash shortage problems

with National Vendors machines and that Stoudemire had reported

those problems to a National Vendors sales representative in the

spring of 1991. According to National Vendors, Stoudemire's testimony "in no way rebutted any matters raised in defendant's case," but

was merely used to support Atlas' case-in-chief.

While it appears that Stoudemire's testimony was offered to rebut

Glenn Peters' testimony that he could not remember discussing cash

shortages with her, even if we assume that Stoudemire's testimony

was not true rebuttal testimony, we cannot agree that the court abused

its discretion in altering the order of proof or that the alteration in the

order of proof significantly prejudiced National Vendors. If National

Vendors was surprised or prejudiced by the testimony, it could have

requested surrebuttal, which it did not do.

For the foregoing reasons, we affirm the district court's rulings on

all points challenged in this appeal.

AFFIRMED

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